Vietnam Today

IMF: Vietnam must look at public debt

Released at: 15:25, 18/04/2015

Country in need of fiscal consolidation, IMF says in Washington D.C.

by Doanh Doanh

Mr. Chanyong Rhee, Director of the Asia and Pacific Department at the International Monetary Fund, said that Vietnam should pay attention to its level of public debt at a press conference on the Asia and Pacific region on the sidelines of IMF/WB Spring Meetings on April 17 in Washington D.C. “Public debt is still high in Vietnam and Sri Lanka and requites attention,” he said.

Vietnam’s debt-to-GDP ratio was projected at 60.3 per cent of GDP in 2014, up from 54.2 per cent in 2013, Prime Minister Nguyen Tan Dung told a government meeting late last year. It will rise to 64.9 per cent in 2016 but will then fall to 60.2 per cent in 2020.

Mr. Rhee added that most frontier and developing economies in Asia and Pacific are expected to grow above 6 per cent in the near future but risks remain. “We are focused on Vietnam having growth in the next two years of 6.0 per cent and 5.8 per cent, which are very similar to last year’s figure,” he said.

He also summarized the IMF’s recommendations that, in some countries, including Vietnam, “gradual fiscal consolidation would strengthen resilience.”

Strategy on Public Debt and National Foreign Debt in the Period of 2011–2020 and Vision to 2030, approved by Prime Minister Nguyen Tan Dung in Decision No. 958/QD-TTg on July 27, 2012.

The strategy will be implemented in two phases of five years each: 2011-2015 and 2016-2020, through specific plans, as follows:

1. Targets and orientations for mobilizing and using loans, managing debt and norms of debt safety in each five-year periods.

2. Medium-term debt management programs, starting for the three years of 2013-2015.

3. Developing domestic capital markets, including the government bonds market, in order to increase mobilized capital for the State budget and for development investment.

4. Enhancing the management of risks in public debt in order to reduce public debt obligations and realize norms of debt safety.

5. Managing government guarantees, including specifying prioritized programs and projects provided with government guarantees in specific periods and setting up monitoring mechanisms.

6. Local governments’ mobilization, use, payment and management of debt to be in line with regulations on State budget management.

7. Improving efficiency in mobilizing and using loans and repaying foreign trade loans taken out by the government.

8. Mobilizing and using ODA capital and foreign preferential loans from donors in the period of 2011-2015.

9. Designing a public investment program, with national target programs.

10. Consolidating financial institutions that are responsible for investment credit, export credit, and credit for State policies (i.e. VDB, Social Policy Bank).

11. Raising the national credit ranking in order to foster the mobilization of capital in international financial markets.

12. Perfecting the organizational apparatus of the debt management agency, enhancing qualifications and the capacity of debt management staff.

13. Further perfecting databases and publishing information on public debt and national foreign debt.

14. Studying public debt management in other countries and drawing lessons for Vietnam.